May 28, 2018 Author: Murray Wise Associates
The golden rule of real estate: location, location, location. Does it apply to farmland? Absolutely! As you would expect, there is a big difference in the value of two high-quality, productive grain farms if one is located in the Mississippi River delta and the other is in central Illinois. The differences are easy to spot – the type of soil, yield potential, the need for irrigation or drainage, access to grain markets and the rent levels the area is able to support.
But what about two high quality farms both located in central Illinois? Those differences might be harder to see. Let’s say we have two farms: both picturesque rectangular 80-acre properties, each with a Productivity Index rating in the low 140s, that drain well and have easy access off a paved road. One is located in Piatt County, and the other in Sangamon County – about 80 miles apart as the crow flies. Both of these farms were sold at auction in the 4th quarter of 2017, and general consensus is that both sold well with good auction attendance and spirited bidding. When the dust settled, the farm in Sangamon County brought $13,400 per acre while the farm in Piatt County “only” brought $10,750 per acre. Why such a difference?
In the above scenario, several factors come into play. While the farms are statistically similar, the major differences may be the location and the strength of the surrounding neighborhood, both financially and from a demand perspective. At MWA, we keep a close eye on various land markets across the country. When we are contacted about selling a farm, one of the first questions we typically are asked is, “What is my property worth?” This is the start of our questioning process. To really answer the question takes a bit of effort. We have to look at the strength of the local operators. Are they well capitalized? Will there be multiple bids for top-of-market rents to an investor? We look at neighboring farm ownership. Will these direct neighbors – or neighbors down the road – be potential buyers? Is the number of adjoining neighbors limited as the farm is cut off by an interstate highway or railway? Sometimes, just the name of a county or area will demand a higher price as investors like to say they own land in a certain location and want to buy only there. We also look at sales data to see if there have been a high number of sales in a particular location, taking some potential buyers off the table as they have already made purchases.
This is where having an experienced firm such as MWA Auctions and Real Estate on your side will help ensure you do not overpay as a buyer or let a farm go for too little as a seller. We always dig just a little bit deeper to help you better understand the potential value of a piece of property.
Murray Wise founded the Westchester Group in 1986 after acquiring the Champaign, IL division of the Sandage Companies, a traditional farm management and brokerage firm…
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#TBT to 5 years ago this week & the East Coast Brokers & Packers auctions in Florida and Virginia in which we sold over 10,000 acres of tomato producing farmland, storage and packing facilities, and equipment in partnership with @CrosbyAssocs @weeksauction and @WoltzRealEstate pic.twitter.com/aHYeZUgM1u
**REMINDER** - Meigs County, OH Open House tomorrow - Thursday, August 16th from 4pm-6pm EST at the Salem Township Fire Station #6 in Langsville, OH. 423 acres in 17 tracts PLUS a hunting lease up for auction! For more information, visit: http://www.murraywiseassociates.com/farmland-real-estate/auction/ItemId/127/Ohio/Meigs-County?utm_source=Email+Database&utm_campaign=1f40bb535c-AEP+-+Morgan_COPY_01&utm_medium=email&utm_term=0_d05924d421-1f40bb535c-216036305 … pic.twitter.com/3LCkBgbJis
Brooke Didier Starks with Meyer Capel says, "Plans that irrevocably lock farmland in arrangements for extensive years eventually run the risk of resulting in unrealistic outcomes."
Read 4 other tips here! http://www.murraywiseassociates.com/Blog/farm-succession-planning-5-thoughts …
Murray Wise Associates LLC
1605 South State Street, Suite 110
Champaign, IL 61820
800.607.6888 (Toll free)
Real Estate and Farm Management
Murray Wise Capital
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